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Health Care Changes Could Hurt New York

So far, 2003 is proving to be a hot year for health policy developments, both locally and nationally. Here is an update:

Unfortunately, most of the dire budget predictions made here earlier are coming true. The city asked that the state pay an additional $200 million of its Medicaid costs; instead, Governor George Pataki wants the city to pay a greater share of hospital and clinic costs than it does now. In exchange, the state would provide more money for prescription drugs. This shift would benefit many upstate counties, but would hurt the city because 35 percent of city Medicaid payments go to cover inpatient hospital costs while only 15 percent go for drugs. Medicaid is the federal health insurance program that provides coverage for the poor.

The New York Times estimated that the change would cost the city an additional $140 million and wrote in an editorial that the cuts would devastate the city's teaching hospitals, which educate about 15 percent of all doctors in the United States.

The governor also wants to reduce the number of people eligible for Medicaid. He has proposed lowering the maximum income that people can have and still qualify for the program. In the past, this has proved to be counterproductive because many of those kicked off Medicaid remain uninsured. Then, when they turn up in emergency rooms needing treatment, the city is forced to cover 100 percent of the cost. If these people had stayed on Medicaid, the federal government would have paid 50 percent of their treatment costs.

The federal government also has its eye on Medicaid. States, including New York, put many people on Medicaid who do not meet all the federal rules for being in the program. In fact, one third of people currently on Medicaid in the United States fall into this category and receive a full package of benefits. But the Bush administration is proposing that this change - that people who states voluntarily add to the Medicaid program no longer get all benefits.

Under current rules, states must apply for a federal waiver to change eligibility requirements and benefit packages in many cases. With the new system, they would no longer have to do so.

Critics-including some Republicans -say that the Bush proposal looks remarkably similar to a plan vetoed by President Clinton, who said at the time that it would lead to cuts that would be "devastating" for the poor.

"I don't see how New York would benefit with this kind of arrangement," says James R. Tallon, president of the United Hospital Fund. "New York has a significant Medicaid program, therefore, one has to be skeptical about any standard federal formula. New York probably has more to lose than gain."

The National Governor's Association, which might be expected to enthusiastically support anything that offers Medicaid spending relief (since Medicaid spending makes up approximately 20 percent of most state budgets) did not endorse the proposal but simply thanked the administration for putting Medicaid spending in the spotlight.

The president has put Medicare reform on his agenda as well. During his State of the Union address last month, Bush proposed adding a prescription drug benefit to the program. But to take advantage of the benefit, the elderly would have to enroll in health maintenance organizations. The administration, through its administrator of the Center for Medicaid and Medicare Services, Tom Scully, denied that the program would "force" beneficiaries into HMOs, but few details of the plan have yet been released.

There is some unequivocal good news for Medicare patients and their doctors, however. Scully told a Senate subcommittee on January 30 that the administration did not support actually going through with the 4.4 percent cut in doctor's fees that is scheduled to go into effect on March 1. This will now be considered along with the federal budget. Experts had said that, following a 5.4 percent reduction that went into effect last year, another cut would drive even more doctors out of the program.

And Pataki had some positive news for one group of health care consumers-the seriously mentally ill. After the Times revealed that nursing homes were warehousing mentally ill patients and that many of the group homes serving them provided worse care than the mental institutions they replaced, the governor appointed a commission to look into the problem. Taking its recommendations, Pataki has proposed spending $80 million to create new housing to replace the current system. While Democrats want more, advocates for the mentally ill are pleased to get a substantial increase during a fiscal crisis.

Maia Szalavitz is author, with Dr. Joseph Volpicelli, of "Recovery Options: The Complete Guide: How You and Your Loved Ones Can Understand and Treat Alcohol and Other Drug Problems." She writes frequently on health, science and public policy for the New York Times, New York Magazine, the Village Voice, and other publications.

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